* FTSEurofirst 300 index ends at lowest close since Oct 2005
* Banks shares tumble on renewed asset writedown worries
* France Telecom bucks the trend, lifted by broker upgrades
By Blaise Robinson
PARIS, July 1 (Reuters) - European stocks fell 2.2 percent
on Tuesday, ending at their lowest close since October 2005 as
fears of asset writedowns returned to haunt the banking sector,
while strong oil prices continued to stoke inflation concerns.
Banks took yet another beating, with UBS <UBSN.VX> hitting
10-year lows, down 5.3 percent, while Deutsche Bank <DBKGn.DE>
lost 4.4 percent as talk swirled that more hefty writedowns
stemming from the credit crisis could further hit second-quarter
earnings within the banking sector.
France Telecom bucked the trend, featuring among the very
few stocks on the upside as several brokerages upgraded their
rating on the stock after the company dropped its takeover offer
on Nordic telecoms operator TeliaSonera <TLSN.ST>.
The FTSEurofirst 300 <> index of top European shares
closed 2.2 percent lower at 1,175.55 points. The index, which
has fallen in seven of the last 10 sessions, has tumbled about
22 percent so far in 2008.
"The impact from the U.S. subprime market debacle is far
from over, especially for retail banks and insurers, while
investment banks have already unveiled big writedowns," said
Romain Boscher, head of equity management at Groupama Asset
Management, in Paris.
"But it might be time to come back on some industrials, and
we remain confident on commodity-related stocks as the slowdown
in growth has already been priced in," he said.
Mining and energy stocks were among the biggest losers,
retreating on worries over the outlook for the global economy,
despite buoyant oil and base metal prices.
BP <BP.L> shed 2.4 percent, Rio Tinto <RIO.L> lost 4.1
percent, and Xstrata <XTA.L> fell 4.8 percent.
But despite Tuesday's losses, the DJ Stoxx basic resources
index <.SXPP>, home of the heavyweight mining stocks, remained
Europe's best performing sector so far this year, with a gain of
2.4 percent in the year to date.
At the other end of the spectrum, banks have lost about 35
percent so far this year, making the DJ Stoxx index of European
banks <.SX7P> the worst performer among the sectoral indexes so
far, followed by autos <.SXAP> and retail stocks <.SXRP>.
"This is more concern coming back in on the banking sector
again; there are a lot of rumours about writedowns," said Andrea
Williams, head of European equities at Royal London Asset
Management.
"We're obviously into the critical period of second-quarter
numbers, and analysts are finally beginning to downgrade their
forecasts for 2009, whereas they weren't before. They're
probably starting to be more realistic about the companies they
cover ... so it's all pretty gloomy."
Oil prices remained above $142 a barrel on Tuesday, fuelling
concerns over input costs for companies and over consumer
spending.
Auto stocks tumbled, with BMW <BMWG.DE> down 1.9 percent,
Peugeot <PEUP.PA> down 3.6 percent, and Renault <RENA.PA> down 2
percent.
Around Europe, Germany's DAX index <> ended down 1.6
percent, UK's FTSE 100 index <> down 2.6 percent, and
France's CAC 40 <> down 2.1 percent.
So far this year, the DAX is down 22 percent, the FTSE 100
is down 15 percent, and the CAC 40 is down 23 percent.
(Additional reporting by Amanda Cooper in London, editing by
Will Waterman)
